The Law Q&A | Credit cards, debit cards and unauthorized use

If your credit card or its number is used by an unauthorized user, do you have to eat the debt owed to the card issuer? What about debit or ATM cards? Is one better than the other? What the heck is the difference between them anyway?

A credit card is a loan agreement between you and the financial institution issuing the card. That bank is paying for your purchase of the good or service you buy at the moment the card account is electronically communicated to the loaning bank.

A debit or ATM card is an electronic checkbook. Its use is directly tied (electronically) to your money-holding account. Use of the card transfers the money from your account to the party from whom you are buying the good or service (or getting cash at an ATM machine).

Regulations of both credit and debit/ATM cards are governed by state and federal law. Most states, including Illinois, simply adopt and incorporate the federal law, which is discussed here.

On a debit or ATM card, if you report to your bank that you have lost your card, or believe your account number has possibly been pilfered, your bank has to reimburse you on any drainage of your account that is suffered after notice is given.

If you notify your bank within two days of the discovery your debit card is lost or the number is stolen, you are not liable for more than $50 up to the moment of notice. The bank must reimburse the rest.

If you notify your bank after two days of learning of the loss or unauthorized use of the debit account, but within 60 days of the bank sending your statement that would show unauthorized use, the maximum that the account holder eats is $500. If you don't notify your bank within 60 days of your statement, you eat the entire loss.

On credit cards, if you report the loss of the card before your card is used, you are not responsible for any charges you didn't authorize. If the lost or stolen card is used without authorization before you notify the issuer, you will eat not more than $50. If the card number is stolen but not the card, you are not liable for any of its unauthorized charges if you alert the card issuer of the fraud upon discovery.

The credit card is convenient in not having to lug cash or a checkbook around. It's a quick loan that, if promptly paid off, carries no interest. If not paid off, it carries a proverbial ton of interest. Typically, 18 percent and well north of that.

The debit card is also convenient in not having to tote a checkbook around. But if the number is hacked or stolen and your account is suddenly entirely drained, ouch. Can't complete the purchase of that wonderful dinner. Yes, you may ultimately get reimbursed by the bank, but that takes time. You need the money this instant.

Excuse me now, I need to order some more federal banking codes that I saw on eBay.

Where's that stupid card of mine? Can't find it.

Brett Kepley is a lawyer with Land of Lincoln Legal Assistance Foundation. You can send your questions to The Law Q&A, 302 N. First St., Champaign, IL 61820. Questions may be edited for space.